Thread by @eringriffith

🩸 US v Holmes continues today with cross-examination of Lisa Peterson, who managed the DeVos family's $100m investment in Theranos.

Here's our wrap-up of last week's proceedings. nytimes.com/2021/10/27/tec…

And just to recap the stakes of the case:

nytimes.com/2021/08/30/tec…

Right out the gate prosecution objects to an email defense is using to refresh Peterson's memory that she wasn't on.

Judge Davila: Anything can be used to refresh a witnesses's recollection, a shoe, a sock...

Defense atty Lance Wade: I'll keep my shoes on, your honor.

Wade keeps asking questions meant to trap Peterson over prior comments, she keeps offering more detailed answers, Wade keeps striking her answers from record.

After striking at least 5, the judge scolds Wade: "Some of your questions are lend themselves to an explanation."

Some points of contention: When the investment decision was made. Whether Peterson had gone to Theranos's website to see it advertised CLIA lab tests. What Theranos said about its military work. Comments Peterson made in prior depositions that contradict her testimony today.

Wade shows Peterson the legal agreement for the investment and goes through all the normal disclaimers - projections can change, the investment was speculative, RDV (the DeVos firm) was accredited and sophisticated, etc. The "you should have known better" argument.

Peterson pushes back: "You’re trying to measure our sophistication as an investor when we weren't given complete information."

Wade moves to strike and Judge Davila tells Peterson to wait for Mr. Wade's questions.

Theranos told RDV in October of 2014 that it would do $140m in revenue that year. It had zero.

Prosecutor Robert Leach: "Did you in anyway dream that revenue for that year would be zero?" She says no, "projections should be somewhat close."

Uh... we went on a break because someone walked into the back of the courtroom and took a photo. That person is now being chastised by the judge.

It's usually pretty clear in the gallery who is a reporter and who is a member of the public. There are always a few people in suits who I can't quite place. The guy who took a photo had a suit on. He is, unsurprisingly, not here now.

We got a few minutes into testimony before a long sidebar between counsel over an exhibit prosecution wants to introduce. Here's one take by @adamlashinsky on why this case seems to be moving so slowly

businessinsider.com/elizabeth-holm…

Peterson is excused. Next witness is Constance Cullen.

Cullen worked at Schering-Plough. They asked her to participate in evaluating Theranos's technology. They beta tested a few machines machines and she visited Theranos's offices.

We see a calendar invite and agenda from a May 5 meeting. This was the first time Cullen met Holmes in person.

Cullen said she asked many questions and "was dissatisfied, quite honestly, with the response to the questions."

(Note: This was 2009.) "There was insufficient technical detail for us to be able to evaluate the technology." She says Holmes answered almost exclusively, even questions directed to others.

Cullen adds "There were no direct answers to questions and the questions are fairly technical, so the answer should be fairly technical and direct.

"There were what I’d describe as cagey responses or attempts to redirect to other topics of discussion."

Cullen says she didn't say anything about it at the meeting because "um, it's awkward." Unfortunately I can't see Holmes' expression but I have a feeling if they run into each other in the bathroom later it'll be even more awkward! 😬

We see the infamous validation report that featured Schering-Plough logo. Cullen says she did not agree with the report's conclusions and no one at S-P said the docs were accurate.

In the second version of this document, the conclusion adds the word "more" to the line about the results' accuracy. Cullen says again she doesn't agree with that conclusion. End of direct exam of Cullen.

John Kline is leading a cross-examination. Cullen testifies that S-P was impressed with the demo they did of one blood test on a Theranos machine they were given.

Kline asks about the validation work that S-P did with Theranos was sufficient. "It hit the requirements but at the end of the day, the execution would not have been in alignment with FDA requirements for validation."

Cullen testifies she never objected to the validation protocol. We see the invoice for Theranos's work with S-P with the objective of “comprehensive validation of the Theranos cytokine panel under FDA/ICH guidelines”

Kline, who is a lot folksier than Wade, asks Cullen to repeat that she never voiced her concerns with Theranos to the company because it was awkward. Apart from one email, is Cullen aware of any emails from s-p or Theranos asking for more information? "No."

Theranos's work with S-P fell off when the company merged with Merck. We see emails from Holmes to Cullen trying to move the validation forward with no response from Cullen. Kline make the final point that S-P never told Holmes about her concerns.

Next witness is Dan Mosley, a lawyer and guy about business. He invested $6m in Theranos after Henry Kissinger, his client, introduced him in 2014. He now works for Byron Trott, Warren Buffett's banker who was discussed during the DeVos testimony.

The Web of Powerful Men goes on: We see an email where Mosley offers to connect Holmes to the Walton family. Mosley says Holmes wanted investors who were "high quality families."

Holmes snail mailed Mosley a thick stack of presentations in 2014. We discuss lines like:
"The company plans to be private for the long term."
"Theranos has grown from cash from its contracts for some time."

We're looking at illegible handwritten notes Mosley took and it feels like deciphering ancient scrolls

We run through the entire rigamarole we have now seen many times: listing out the specific and clear promises theranos made to investors about its technology and the investor testifying they invested on that information.

It is incredible how much mileage Holmes got out of one Fortune article. I think every investor who has testified said they read it. I guess prosecution keeps bringing it up because we know the author Roger Parloff will soon testify.

We talk about the revenue projections and Schenk pre-empts the defense's argument that projections are about the future and not supposed to be accurate by asking Mosley about that. Since it was October, Mosley expected the $140m revenue projection for the year to be p close.

Byron Trott's firm, BDT, threw a conference in Chicago in 2014, where Mosley introduced Holmes to the DeVos family, the Walton family and the Cox family -- all clients of his. 🤑

Mosley wrote a memo to Henry Kissinger about Theranos's technology with a strong strong endorsement. He believed fully in the conclusions from the pharma validation reports.

Mosley testifies that he liked that Elizabeth Holmes' shares in Theranos had 100x voting power of the other investors. "She was obviously a visionary that had created this company and developed the technology and having her in control of the company was a good thing."

We see a list of Theranos's risks in Mosley's memo to Kissinger.

Prosecution asks why it doesn't list the risk that Holmes could give inaccurate descriptions of her company's technology.

"I did not believe it was a risk," he says.

Theranos's investment docs had a provision for mandatory redemption, ie, the company could buy back shares at any price at any time. 🤔 Holmes reassured Mosley that wouldn't happen.

Correction: Mosley invested 5,999,997.00 because that amount gave him an even number of shares. Did not realize companies did that!

I imagine this will be a contentious cross-exam. We're already talking third-gen billionaires and levels of white shoe law firm prestige.

Mosley's description of what he does at BDT is comically vague. "I'm involved in the management of the firm, I run the New York office. We advise and work with high net worth families and I do that type of work."

My head is spinning from all the billionaire name dropping. Henry Kissinger. The Cox family. The DeVos family. The Walton family. The Agnelli family. Stavros Niarchos.

Wade is putting Mosley at the center of this web, having connected many of them to Holmes.

Lol, we see an email reference to Bohemian Grove and Wade makes him explain what it is. washingtonpost.com/blogs/blogpost…

Honestly his answer was a little disappointing. Lance Wade, go back and ask more about druid worship at the Grove please

The jury is dismissed for the day. Chaotic vibes today, between the guy who snapped a photo in the courtroom 😱, a stifling 76 degree room and a worked up person in the hall bugging journalists about their parking dispute.